Government Accountability Needed to Restore Mortgage Confidence

Politicians and regulators need to get with the times — for the sake of the housing market and its participants.

That message served as the guidepost for David Stevens’ remarks at the Mortgage Bankers Association’s National Secondary Market Conference in New York this week. Stevens, president and CEO of the MBA and the former commissioner of the Federal Housing Administration, did not pull punches in calling out the United States government for its role in the current predicaments faced by lenders and would-be homebuyers alike.

Stevens made a general argument about accountability, contrasting the work done by the mortgage industry in the wake of the recession and meltdown with the inaction on the part of government officials.

“Regulators and enforcement agencies must own their role in the pace and path of recovery,” he said in prepared remarks released Monday. “Today’s environment is not encouraging credit expansion. It’s forcing lenders to be overly conservative — ultimately failing entry-level homeowners on every front.”

Stevens also put a spotlight on policymakers, saying that politicians needed to be more honest with what policies are flawed and how to correct them. In addition, he pointed to the lack of consistency in the mortgage industry. Bank and nonbank lenders cannot always provide the same options to consumers, while state regulators can create confusion when creating their own rules separate from national standards.

Overall, Stevens cited a quote from President Obama in The Economist discussing the need for refinement in the regulatory laws.

In terms of fixes, Stevens outlined specific approaches the regulators, politicians and industry participants can take to improve the housing market. Stevens pointed to the need for a change in the dialogue to improve customer confidence, which has waned in recent years due to the public image of regulations on the mortgage industry making it less than trustworthy.

“We’re operating in the safest, soundest lending environment in decades,” Stevens said in his remarks. “Consumers should feel confident in applying for loans and purchasing homes. Policymakers should champion this environment and do a victory lap letting consumers know they are well protected and that they can trust the system.”

Additionally, Stevens looked into the secondary market, focusing on the need to return to private securitization for the needed capital to have a true functioning market.

Stevens also noted that changes were needed for the ability-to-repay/qualified mortgage rule. As proof, he pointed to the fact that non-QM and nonagency loans are mostly held by the wealthiest buyers, while credit remains tight for people on the other end of the spectrum.

“It’s time to recognize that QM does not work without the patch, which leaves us beholden to Fannie Mae and Freddie Mac’s underwriting systems as the hope for credit access rather than the rule itself,” he said.

Doing all of this, he said in his closing, would restore confidence in the industry, which he added would “reignite the economic engine of the real estate market.”

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